Compute the portfolio expected return, Advanced Statistics

(a) You are trying to develop a strategy for investing in two different stocks, Stock A and Stock B. The anticipated annual return for a $1000 investment in each stock under four different conditions has the following probability distribution:


Probability Economic

        condition                     StockA            Stock B

0.1       Recession                -$50                 -$120

0.4      Slow growth               $20                   $0

0.4      Moderate growth       $80                  $140

0.1     Fast growth                $150                $250

Compute the portfolio expected return and portfolio risk if the percentage invested in Stock A is either 30%, 50% or 70%. On the basis of these results, which portfolio would you recommend? Briefly explain the reason for your answer.

b) In a triangle taste test conducted at a Woolworths supermarket, the taster is presented withthree samples, two of which are alike, and is asked to pick the odd one by tasting. If a tasterhas no well-developed sense of taste and picks the odd one by guessing,

(i) What is the probability that in six trials (ie. six taste tests) he or she will make at least one correct decision.

(ii) How many correct decisions would you expect in six trials (ie. six taste tests).

(c) A manufacturing plant's main production line breaks down an average of 2.4 times per day.

Assume breakdowns occur randomly.

(i) What is the probability of at least 3 breakdowns in a day.

(ii) How many breakdowns would you expect in seven days.

Posted Date: 2/25/2013 4:32:40 AM | Location : United States

Related Discussions:- Compute the portfolio expected return, Assignment Help, Ask Question on Compute the portfolio expected return, Get Answer, Expert's Help, Compute the portfolio expected return Discussions

Write discussion on Compute the portfolio expected return
Your posts are moderated
Related Questions
Outlier is an observation which seems to deviate markedly from the other members of the sample in which it happens. In the set of systolic blood pressures, {125, 128, 130, 131, 19

Bayesian inference : An approach to the inference based largely on Bayes' Theorem and comprising of the below stated principal steps: (1) Obtain the likelihood, f x q describing

The type of longitudinal study in which the subjects receive different treatments on the various occasions. Random allocation is required to determine the order in which the treatm

Cohort component method : A broadly used method or technique of forecasting the age- and sex-speci?c population to the upcoming years, in which the initial population is strati?ed

Naor's distribution is the discrete probability distribution which arises from the following model; Assume an urn contains n balls of which one is red and the remainder is whit

How large would the sample need to be if we are to pick a 95% confidence level sample: (i) From a population of 70; (ii) From a population of 450; (iii) From a population of 1000;

The method or technique for producing the sequence of parameter estimates that, under the mild regularity conditions, converges to maximum likelihood estimator. Of particular signi

Residual plots are the plots of some type of residual which might be helpful in assessing the assumption made by the fitted model. In regression analysis there are various method

Bartlett decomposition : The expression for the random matrix A which has a Wishart distribution as the product of the triangular matrix and the transpose of it. Letting each of x